How COVID-19 Has—And Has Not - Affected Global Ad Spending

How the Pandemic Is Affecting Advertising, Media, Retail, Tech and Telecom

here are still many uncertainties regarding how fast and far COVID-19 will spread worldwide, and health officials in most countries without severe outbreaks are simply urging consumers to be cautious. We have taken the same approach in updating our global ad spending forecasts.

In 2020, we expect total media ad spending worldwide will reach $691.7 billion, up by 7.0% from 2019. That’s a decrease from our previous forecast when we expected worldwide ad spending to rise by 7.4% to $712.02 billion this year.

Note that our forecast was completed on March 6, 2020, before US President Donald Trump announced a 30-day ban on the entry of most Europeans into the US, which temporarily halted the stock market. Also note that the projections represent a full-year outlook.

Our downward revision is primarily due to one country: China, the epicenter of the COVID-19 outbreak. The first case was discovered there in late December 2019, so we have had more time to track the virus’s impact on the country’s ad market.

This year, we expect total media ad spending in China to reach $113.7 billion, down from our previous estimate of $121.13 billion. China is the world’s second-largest ad market after the US, so a reduction in our China estimates would lower our global forecast.

We have also downgraded China’s 2020 ad spending growth rate to 8.4% from 10.5% due to a reduction in spend across all media formats, including digital.

Despite the increase in digital media consumption in China as consumers try to keep themselves entertained and informed at home, advertisers are reluctant to spend what could be lost dollars if supply chain shocks prevent them from getting their products to market. We expect digital ad spending in China to grow by 13.0% in 2020 vs. our previous estimate of 15.2%.

Companies in other parts of the world that are dependent on supply chains in China may also start reducing their ad spend to mitigate economic losses. There is evidence to suggest a slowdown in Amazon ad spending, particularly among smaller third-party sellers that already have tighter cash flow. It’s possible that this trend could extend to other digital platforms if problems continue.

Out-of-home (OOH) ad spending could also feel a negative impact worldwide if the social distancing and isolation measures that have emerged in some cities expand to larger territories. Consumers in countries with significant numbers of reported COVID-19 cases are already actively avoiding large public places and gatherings, and that may eventually impact advertisers’ willingness to advertise there as well.

For now, however, we are not making any other major adjustments to our ad spending forecasts because of the COVID-19 outbreak. Our forecasts are for the full year, and there is still a strong possibility that the virus could be contained in the coming months, allowing for a rebound in H2 2020. In most countries, the bulk of ad spending takes place in the latter part of the year for the holiday season.

One factor that could cause us to re-evaluate our outlook is if the 2020 Summer Olympics in Tokyo are postponed or canceled. Even as organizers around the world have pulled the plug on many other major events, our forecast assumes that the Olympics will still take place in June, and we expect that to provide a boost in ad spending in the US and worldwide.

A sustained economic contraction could also cause us to revise our forecast later this year. While some major industries—such as travel and tourism—have already been hit hard, it’s too soon to tell how debilitating the impact will be on the global economy in the long-term. It’s true that the recent stock market blows from the COVID-19 crisis could bring us closer to an economic slowdown, but it’s important to note that industry experts have been weighing the possibility of a recession for at least a year.

In China, where it seems that the worst of the outbreak is over, there are early signs of a possible economic turnaround. We are cautiously optimistic that a potential global economic downturn could also be short-lived, mitigating negative impacts on the worldwide ad market on a full-year basis. It’s also important to keep in mind that China’s GDP growth has been decelerating for the past year, so COVID-19 was an added strain to an already slowing economy and ad market.

Manroland Goss

Dear customers and business partners,

The current pandemic situation expose us all with special challenges, both privately and business-wise. The resulting limitations are now being felt by everyone. This is precisely why we here at manroland Goss are giving our best to keep business as usual for you.

We have taken safety and security measures to protect the health of every employee, customer and supplier. It is also our corporate duty to minimize risks and contain the spread of the virus.

The following actions are some of those measures:

The majority of our staff works in home office and is reachable within normal office hours.

You can still reach your contact persons via the contact data you know.

In order to be able to hold important meetings, we use telephone/ and video conferencing systems (such as Ringcentral or Teamviewer)

You can reach our Tele Support Service as usual by phone at 0821/4244100 or by email at Esta dirección de correo electrónico está siendo protegida contra los robots de spam. Necesita tener JavaScript habilitado para poder verlo..

Business trips and on-site appointments are reduced to a necessary minimum.

Events and training courses are postponed for the time being.

Despite the utmost care in our catalogue of measures, unforeseen events beyond our control may result in restrictions or delays in the process. We rely on your understanding.

Remain confident and prudent. We are convinced that we will master this difficult situation together and will be available to you again in the near future in the usual manner.

Declines in ad revenue and all those canceled events might prove manageable. But the real risk would come with a virus-inspired recession — and how the industry’s hedge-fund owners might respond to it.

The news cycles of the past few days have been almost completely monopolized by the novel coronavirus, with stories that would have dominated headlines not that long ago seem to have been shoved deep inside the Internet’s A-section.

(Just this morning, Harvard — where we at Nieman Lab and the Nieman Foundation work — announced it was making all classes after this week virtual for the rest of the semester, telling students they needed to vacate their dorms by Sunday evening. Expect a significant share of the next couple of months’ Nieman Lab stories to be written and edited from our kitchen tables. Or coffee shops practicing good social-distancing hygiene.)

But amid it all, it may have gotten lost just how dangerous the COVID-19 disruption is to the American news business — in particular, its most endangered segment, local newspapers. I’m not talking about the journalistic risk, which are very real: staffers coming down with the virus, quarantines hurting their ability to report effectively. I’m talking about the risks to the battered business of reporting the news. Here’s a sampling of some of the biggest, in what I’d consider increasing order of potential damage.

Event cancellations. While events are still a small slice of the overall revenue pie for most publishers — less than 10 percent for nearly all local outlets — cancellations can come with catastrophic losses of payments made upfront. It’s not just the events about journalism that are shutting down; it’s the festivals, conferences, town halls, and other events produced by news organizations. That’s an especially big loss for national outlets who generate big chunks of their annual revenues in a single weekend. And even if your event doesn’t get canceled, who knows how many of the people who would have bought tickets will stay home and watch Netflix instead? This will be a small and nagging problem for most, but potentially existential for some.

Home delivery. Remember, most newspapers still make the clear majority of their money from the print edition, not anything digital. Most of the readers they deliver the print paper to are older and thus more at risk of infection.

If lockdowns on travel and movement within cities grow more intense, how will it impact the thousands of delivery people who take those papers from printing plant to front porch? Will some sneeze-happy paper deliverer be found to be spreading his virus all the way down his route?

Newspapers were already having a very hard time finding people willing to do that job, thanks to new competition from Uber et al.; but now even Uber is worried about keeping drivers — not to mention passengers who might not be too keen on being the 18th person to sit in that particular backseat today. Physical distribution is likely to get caught in the web of whatever changes come.

Many outlets, especially NBC TV stations, expect a quadriennial boost in ad revenue and audience because of the Summer Olympics. Will they still get it if athletes in Tokyo play before empty arenas — much less if the games are canceled altogether?

Perhaps most importantly, all the companies that stand to lose big in the coming months — hotels, airlines, restaurants, movie studios, cruises, trade shows — will almost certainly have less money to spend buying ads. (And Purell and Clorox don’t need to — they can sell out their inventories via panicked Amazon searchers alone.)

The Times has a failsafe: It is far less reliant on advertising revenue than it used to be, and far more reliant on revenue from readers via digital and print subscriptions. More than 5 million paying subscribers can do that for you. But most news outlets — both local and national, both print- and digital native — don’t have that backstop. They’re far more at risk; what for the Times might be just a minor infection could be fatal for its weaker relations.

Recession risk. This is the potentially catastrophic one. The American news industry had gone through enormous struggles in the decade-plus since the Great Recession began. And for the past 10 years and eight months, they’ve been struggling within an economy that is steadily (if unspectacularly) growing. Over that span, I’ve heard the question a hundred times: If this is how bad things are when times are good, what the hell is gonna happen when there’s a recession?

The news industry has long been unusually responsive to the broader economy; advertising gets cut more quickly than overall spending does. (In 2009, U.S. ad spend dropped 12 percent, significantly more than the 2.5 percent decline in the overall economy. That responsiveness is why the classic chart of newspaper advertising is so wavy even decades before the web came along.)

All of these companies are now either owned, run, deeply in debt to, or being puppet-mastered by one or more hedge funds or private equity firms, and they are all watching a June 30 deadline that is likely to prompt a new round of mergers and acquisitions.

There is exactly one thing that these financial actors find appealing about owning local newspapers: the opportunity to engage meaningfully in the day’s civic discourse through bold journalism that meets the needs of the communities they serve.

Lol, no, really: The one thing is that newspapers generally still throw off predictable cash flow quarter after quarter, and they’d like to have it. The money guys want to milk those assets for as long as they can — cutting costs to the extent possible, pulling out money via questionable dividends, management contracts, and other self-serving, and making sure expenses stay a reliable level below revenues. They appear to have no real end game other than discarding whatever husk remains.

How will those hedge-fund and PE guys react if their newspapers face a sudden revenue shock — and their once-predictable cashflow becomes a lot harder to pull out? I don’t know! But private equity funds are not known for their humane treatment of companies that have outlived their perceived usefulness. At an absolute minimum, expect another and bigger wave of layoffs. In the worst case, could a coronavirus-aided recession be the thing that leads to the wave of daily newspaper closures people have been anticipating — but not seeing — for the past decade?